Wednesday, February 14, 2007

Trading places

The trade deficit in 2006 hit another record by reaching $764 billion. Certainly the higher cost of imported oil has led to much of this although WaPo "staff writers" also say that the deficit is also the result of "American consumers' rising appetite for foreign-made goods." Uh, news flash: this has been happening since the seventies.

Of course, what is not mentioned is just what those "foreign-made goods" actually are. Much of them are indeed made by foreign-owned companies but they are also goods that used to be made in the United States but whose manufacture has been shipped out to countries like China by American companies. American-based manufacture has been suffering tremendous loss, with jobs disappearing at an alarming rate -- the US has lost 3 million manufacturing jobs between January 2001 and January 2006 . No matter for the companies who ship those jobs overseas to exploit cheap labour markets. As Chomsky has pointed out, trade deficits are of no concern to multinational corporations, who happily move operations to wherever the bottom line can be dropped even further. This typically short-sighted behaviour will result in loss of market in the US, where the continuing loss of good-paying jobs ultimately means that US consumers have less to spend on those foreign-made goods. Or perhaps the multinationals think that US consumers will continue to embrace deficit spending in order to keep buying all the crap they buy.

Naturally, US politicians seek a scapegoat other than themselves and US corporations. China fits the bill nicely. But China finally responded to the usual bluster:
China asserts that it has been made a scapegoat for the loss of U.S. manufacturing jobs. Many of China's exports are produced in factories owned by U.S. firms for shipment to American stores, said Zhang Erzhen, a trade expert at Nanjing University.
The one thing a shaky US economy cannot afford right now is to cause friction with China, which continues to sop up huge amounts of American debt in order to keep their already-owned dollar denominated assets -- $1 trillion, including $350 billion in US T-bills -- from plunging in value and to fuel the buying engine of the American marketplace. But China is not the problem. In fact, as far as US companies are concerned, China is the solution. Just ask Wal*mart.

But just to give you an idea of how dim those in the Bush administration are when is comes to discussing the issue of trade, here's our own U.S. Trade Representative, Susan C. Schwab, who dredged up what appears to be some simpleton guck from the bowels of the Heritage Foundation and pointed out that US exports increased by 12.7% last year, which did almost nothing to counter the 10.5% increase in imports.
Trade agreements mean more exports. More exports mean better jobs.
No, they don't. Not when you're exporting tube socks. And that is exactly what has been happening. Former Assistant Secretary of the Treasury in the Reagan administration, Paul Craig Roberts, points to the Bureau of Labor Statistics for a dose of reality about all those "better" jobs George Bush and his White House keep yammering about:
Over the past five years the US economy experienced a net job loss in goods producing activities. The entire job growth was in service-providing activities--primarily credit intermediation, health care and social assistance, waiters, waitresses and bartenders, and state and local government.
Grim reality, indeed. But wait, there's more:
US manufacturing lost 2.9 million jobs, almost 17% of the manufacturing work force. The wipeout is across the board. Not a single manufacturing payroll classification created a single new job.

The declines in some manufacturing sectors have more in common with a country undergoing saturation bombing during war than with a super-economy that is “the envy of the world.” Communications equipment lost 43% of its workforce. Semiconductors and electronic components lost 37% of its workforce. The workforce in computers and electronic products declined 30%. Electrical equipment and appliances lost 25% of its employees. The workforce in motor vehicles and parts declined 12%. Furniture and related products lost 17% of its jobs. Apparel manufacturers lost almost half of the work force. Employment in textile mills declined 43%. Paper and paper products lost one-fifth of its jobs. The work force in plastics and rubber products declined by 15%. Even manufacturers of beverages and tobacco products experienced a 7% shrinkage in jobs.
But the pièce de résistance of cognitive dissonance, once again, was registered by the White House and spokesman Tony Fratto elucidated the issue that, sure, there is some pain with the loss of the manufacturing base of the country, but in the end, it's all for the good:
Trade is good for America. There are dislocations for people when you trade. A factory closes, those are real people. But the benefits that accrue to all Americans are clear.
He said this the same day that 13,000 folks were laid off at Chrysler and further declined to tell anyone what, exactly, those "benefits" actually are.

Don't get me wrong. I'm all for the open marketplace and trading goods. Humans have engaged this activity since they walked the earth. It's what we do. But the way modern multinational corporations and those countries that attract them conduct trade is ultimately unhealthy for not only the business of trade but for humanity generally. Despite the Bush administration's best efforts, Americans may never suffer under the yoke of exploitive business practices as they once did -- there are strong reasons for that -- others very much do. And when countries like China announce that they, too, have recognised the need for stronger labour laws, the reaction of the American business community, Wall Street and the White House is beyond shameful.
US-based corporations are fighting a proposed Chinese law that seeks to protect workers’ rights. The law is “setting off a battle with American and other foreign corporations that have lobbied against it by hinting that they may build fewer factories here.”

US-based global corporations like Wal-Mart, Google, UPS, Microsoft, Nike, AT&T, and Intel, acting through US business organizations like the American Chamber of Commerce in Shanghai and the US-China Business Council, are actively lobbying against the new labor legislation. They are also threatening that foreign corporations will withdraw from China if it is passed.

China’s Draft Labor Contract Law would provide minimal standards that are commonplace in many other countries, such as enforceable labor contracts, severance pay regulations, and negotiations over workplace policies and procedures. The Chinese government is supporting these reforms in part as a response to rising labor discontent.
At the same time US politicians complain about cheap labour markets in Asia and demand that countries like China engage better labour and environmental laws -- which they should -- American corporations actively warn China not to do anything like that.

The American business community offers the most concise statement on this position. The US Chamber of Commerce in Hong Kong claims that one of its "universal principles" is that
American business plays an important role as a catalyst for positive social change by promoting human welfare and guaranteeing to uphold the dignity of the worker and set positive examples for their remuneration, treatment, health and safety.
They will do this by blocking legislation designed to improve the remuneration, treatment, health and safety, and other standards of Chinese workers.

The phrase "free trade" is a smoke screen for what it really is, something completely orthogonal to what the words actually mean. If we called free trade, as the phrase is currently employed, by what it really is, I doubt many Americans would be all that thrilled with it. But then, that's just the point.


Blogger Kel said...

Excellent article Bhc. At the end of the second world war the US was responsible for 50% of all the world' production. Now she has a trade deficit with almost every country in the world.

The US's function in world terms is as the world's consumer. And the US now seems to be moving it's workforce towards the service industries. Now whilst the US still has a wonderful GDP, as companies like Enron have proven, in a service economy this can actually be very much a case of smoke and mirrors.

But, as you rightly say, multinationals follow no moral or ethical code, they follow the buck. And that, eventually, bodes ill for all of us.

In the days of Ford Motors, Henry Ford stated that the ethics of the company should be "to make the best product for the cheapest price paying your workers the best possible wages."

I notice that last caveat has slipped out of modern capitalism.

1:17 PM  
Blogger theBhc said...

You're right, Kel. Much of the "growth" of the so-called GDP in the last few years has been based entirely upon the inflating housing market. That's right, GDP growth has been an inflation-based fiction since the dot-com bubble burst and the housing market become the next hyped-up investment bubble. And it is now a bubble that is beginning to deflate, which is one of the reasons why US GDP growth has slowed lately.

3:09 PM  
Anonymous hotpotatomash said...

G R E A T post!

4:05 PM  

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